Overseas pensions and Matrimonial Property: Helpful Guidance

There were 2 financial remedy cases decided, one in the High Court and one by the Privy Council just before the Christmas break and in case anyone missed them in the mad festive preparations I am going to take this opportunity to briefly summarise them

The first case of Goyal v Goyal [2016] EWHC 2758 (Fam) dealt with Overseas Pensions and whether the court of England and Wales has jurisdiction to make any orders in relation to them. The brief facts are that the parties separated after just under 9 years of marriage . They were both aged under 40. They had one daughter, now 16. After separation they engaged in acrimonious proceedings in the Family Court with 65 separate orders being made in relation to the couple’s disputes about the divorce, child arrangements and finances. The husband had worked in banking, but he had developed an addiction to spread betting. Although initially successful, by the time of the parties’ separation, the husband had lost over £500,000 which had been funded by his earnings and through borrowing. In 2013, the decree nisi was pronounced but the decree absolute had not been granted. In the course of financial remedy proceedings, the wife made an application for a pension sharing order. The husband had two pension policies, both of which were English policies administered in England. In February 2014, the parties entered into a consent order, which was subsequently set aside, by which the wife would receive 50% of those two pensions. Subsequently, the husband claimed that he had encashed those two pensions in January 2014 and had used the payment to reduce his debts. It later transpired that, in September 2014, the policies had been converted into an annuity policy in India with a cash equivalent transfer value worth over £87,000. The husband had not disclosed that fact either at the time or in response to a specific questionnaire in March 2015. The judge at first instance, HHJ Brasse, made a number of findings that were adverse to the husband as a witness and as a litigant, including that he had deliberately withheld disclosure of documents and information within the financial remedy proceedings. The judge concluded that because of the husband’s history of dissipation of assets, those assets that were left should be used for the benefit of the wife and child. He therefore ordered payment of a lump sum representing the proceeds of sale of certain shares, maintenance pending suit, and periodical payments for the wife of £6,000 pa until death, remarriage or further order. Save for the issue of the wife’s application for a pension sharing order, the spouses’ claims against each other were expressly dismissed. He further held that the secret transfer of the pensions without the wife’s knowledge or consent and without having disclosed the fact to the court had been a manifestly deceitful course of action which had been designed to defeat the wife’s claims. The matter was adjourned to obtain more information about the pensions.

At the further hearing the wife was able to provide evidence obtained from India that the regular income from the pension annuity was in fact being paid into a bank account in the husband’s name. Although the husband’s case remained that the benefit of the annuity had been assigned formally to another (an Indian resident), no document formally assigning the benefit of the policy had been produced. The judge concluded that the policy was still beneficially owned by the husband and that its income was held by the husband for his own benefit. However the judge concluded that he could not make a pension sharing order or a pension attachment order because the pension annuity policy was in India. He found that the court had jurisdiction, ancillary to its statutory functions under the Matrimonial Causes Act 1973, to make a mandatory injunction against the husband to transfer or assign the policy to the wife. The judge made an order to reflect that conclusion, para 1 of which required the husband to transfer/assign the policy to the wife and para 2 of which ordered the husband to pay, or arrange payment, to the wife all income in respect of the policy pending completion of the assignment/transfer. The husband appealed against that order to the Court of Appeal.

The issue for determination in the Court of Appeal was what jurisdiction, if any, had the Family Court to make an order transferring or assigning one spouse’s interest in a pension annuity policy to the other spouse outside the statutory scheme established by the 1973 Act. The matter was heard by McFarlane and Macur LJJ who allowed the appeal, finding that in the context of family law, the established authorities made it plain that there was no separate residual or inherent jurisdiction available for deployment to fill in any perceived gaps, or to meet, what the court might see as the justice of the case, if that outcome could not be achieved by an order within the statutory scheme. There had been simply no jurisdiction, outside the 1973 Act, for the judge to have made the order that he had which had been aimed at achieving the transfer of the annuity policy to the benefit of the wife and, in the meantime, payment to her of the income. If, as the judge had thought was the case, there was no jurisdiction within the 1973 Act, or any other substantive legal or equitable remedy, to make the order that he had considered to be just and fair, that should have been the end of the matter. If, as had been accepted to be the case, the presence of the policy in India had not been an automatic bar and the court might, depending on the specific legal and factual circumstances, have been able to make a pension sharing order, then the claim should have continued to have been investigated and progressed under the 1973 Act. There had been no legal basis for the judge to have made the order that he had. Accordingly, the judge’s order would be set aside and the pension sharing application would be remitted to the Family Court for redetermination.

That issue of pension sharing came before Mostyn J for redetermination and the husband’s case was even if the pension fund was beneficially owned by the husband the wife’s claim for a pension sharing order should nevertheless be dismissed for two reasons:

i) An order for pension sharing under section 24B Matrimonial Causes Act 1973 cannot be made in respect of an overseas pension; and/or

ii) The wife has adduced no evidence that such an order, were it to be made, would be enforced by the courts in India.

As the matter was deemed to be of some importance to the professions Mostyn J gave permission for the FLBA and Resolution to file written submissions. He received what he described as helpful notes from Philip Marshall QC on behalf of the FLBA and from David Salter on behalf of Resolution.

Mostyn J reviewed relevant sections of the Finance Act 2004, the Pension Schemes Act 1993, the Welfare Reform and Pensions Act 1999 and the Matrimonial Causes Act 1973 and was persuaded by the presumption against extra-territorial effect of a statute and then determined that pension sharing pursuant to s.24B Matrimonial Causes Act 1973 is not available in relation to a foreign pension. Whilst it might be possible for the parties to reach agreement, backed by undertakings, to obtain an order in a foreign jurisdiction to split a pension in that foreign country, in order to approve such technique, the court must be satisfied that the foreign pension provider will give effect to the deal. Turning to the husband’s second argument, Mr Justice Mostyn accepted that the wife had not filed any evidence that a pension sharing order would be likely to be enforced in India. It was well established that a property adjustment order can in principle be made in respect of property sited overseas provided there is clear evidence that such an order would be implemented in the overseas jurisdiction. However, here the wife did not file any evidence to confirm that a pension sharing order would be reciprocally enforced in India. Therefore the wife’s claim for a pension sharing order failed.

The second recent case of interest is that of Scatliffe (Appellant) v Scatliffe (Respondent) (British Virgin Islands) [2016] UKPC 36.

This case was one that originated in the British Virgin Islands where the parties lived. The case was initially heard by a Judge in the High Court of the Eastern Caribbean Supreme Court (British Virgin Islands) in January 2012. The husband appealed and the wife cross appealed to Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands) and the husband further appealed to the Privy Council. The parties married in 1971 and had two children shortly after. In 2009, a decree of divorce was granted to the wife. Soon afterwards, pursuant to an order which gave the wife exclusive right to occupy it, the husband vacated the family home. By the time of the Privy Council hearing the husband was aged 70 and the wife was aged 63. .

The governing statute was the Matrimonial Proceedings and Property Act 1995 whose relevant provisions are similar to sections 21 – 28 of the Matrimonial Causes Act 1973: in particular, the powers to order a lump sum and the transfer of property.

The other facts of the case are not particularly interesting and the main usefulness of the case arises from the fact that Lord Wilson, who drafted the Privy Council’s opinion, noted that principles identified in case-law in relation to sections 23-24 of the Matrimonial Causes Act 1973 are of persuasive authority in relation to the exercise of powers under sections 23 and 25 of the MPPA 1995. He sets out in the Opinion 10 points of guidance in relation to what is matrimonial property and I can do no more than repeat those here:

(i) Section 26(1)(a) of the 1995 Act obliges the court to have regard to the “property and other financial resources which each of the parties … has or is likely to have in the foreseeable future”.

(ii) Thus, when a court finds that an asset is not one in which either party has any interest no account should be taken of it.

(iii) It is, however, confusing for such an asset to be described as “non-matrimonial property”.

(iv) It was when introducing the “yardstick of equality of division” in the White case, cited above, at p 605, that Lord Nicholls proceeded, at p 610, to refer to “matrimonial property” and to distinguish it from “property owned by one spouse before the marriage, and inherited property, whenever acquired”. In the Miller case, cited above, at paras 22 and 23, he described the latter as “non-matrimonial property”; and he explained his earlier reference to “matrimonial property” as meaning “property acquired during the marriage otherwise than by inheritance or gift”.

(v) So the phrase “non-matrimonial property” refers to property owned by one or other of the parties, just as the phrase “matrimonial property” refers to property owned by one or other or both of the parties.

(vi) Accordingly it is contrary to section 26(1)(a) of the 1995 Act for a court to fail to have regard to “non-matrimonial property”. This raises the question: in what way should regard be had to it?

(vii) As was recognised in Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, at paras 65 and 66, it was decided in the White and Miller cases that not only matrimonial property but also non-matrimonial property was subject to the sharing principle. In the Miller case, Lord Nicholls, however, suggested at para 24 that, following a short marriage, a sharing of non- matrimonial property might well not be fair and Lady Hale observed analogously at para 152 that the significance of its non-matrimonial character would diminish over time. Lord Nicholls had also stressed in the White case at p 610 that, irrespective of whether it fell to be shared, a spouse’s non-matrimonial property might certainly be transferred in order to meet the other’s needs.

(viii) In K v L [2011] EWCA Civ 550, [2012] 1 WLR 306, it was noted at para 22 that, notwithstanding the inclusion of non-matrimonial property within the sharing principle, there had not by then been a reported decision in which a party’s non-matrimonial property had been transferred to the other party otherwise than by reference to the latter’s need.

(x) So in an ordinary case the proper approach is to apply the sharing principle to the matrimonial property and then to ask whether, in the light of all the matters specified in section 26(1) and of its concluding words, the result of so doing represents an appropriate overall disposal. In particular it should ask whether the principles of need and/or of compensation, best explained in the speech of Lady Hale in the Miller case at paras 137 to 144, require additional adjustment in the form of transfer to one party of further property, even of non-matrimonial property, held by the other.